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Making the Decision to Borrow

Posted: 13 Mar 2019

3 mins to read

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Nowadays it seems that getting credit is easy.

Nowadays it seems that getting credit is easy; everyone is offering you the capacity to buy, buy, buy. That is why it is more important than ever that you ask yourself a set of tough questions before you enter into potentially financially damaging agreements:

Do I need to spend this money?

This question asks you: why are you borrowing the money? Is the thing that you want to buy/experience worth making this debt?

Is borrowing really the best way to pay for this?

Do you have other options to get the same result? Is there another way that I can make this happen?

Can I really afford it, in terms of monthly repayments?

Is your income stable? Is now the right time to borrow? Do you have a budget that can stretch to include this repayment?

This is just ground work. After you’ve determined that this is what you would like to do, we recommend you use My Credit Check provided free by Compuscan As a leading credit bureau, we can give you a realistic look at your credit score and ability to pay back money. Most importantly, knowing your credit score can help you see whether you are in good standing to get credit from creditors, or whether there are things you need to work on first to boost your credit score.

Remember: bad credit habits are your enemy, debt is not – it can help you build an excellent credit score if you manage your money healthily.

Once you have seen that you can safely apply for credit and you have decided that that is the best way to purchase what you want to buy, you need to go through a solid 5 Step Process to make sure that you are doing something and choosing something that is financially healthy:

Step 1 Look at your budget and determine if you can afford to take this loan and make the monthly repayments.

Step 2 Have a good look around for the best deal that will work for you: compare products and make sure that you only take what you need and can afford to repay. Try not to make too many formal enquiries as this could affect your credit score.

Step 3 Check all the fees and charges, and carefully read the small print, as there may be hidden costs – remember it costs money to get money, but it doesn’t have to cost a fortune.

Remember: You have the right to be given documents in plain and understandable language. If there is something you don’t understand, ask!

Step 4 Make sure that the credit provider you choose is registered and has a good reputation. This means that they are law abiding and will protect your rights as a consumer.

Step 5 Once you have chosen a credit provider, go back to your budget and see if you can afford the monthly instalment they have given you on the quotation (make sure this doesn’t affect your emergency fund) – if yes, go for it!

If your choice of creditor makes it through this 5 Step Process, you can be confident that the debt you are making and paying back will help and not harm your credit score

Get your free credit report!